15-year high for soaring $A

The Australian dollar yesterday hit its highest level for 15 years against the rest of the world, despite new data suggesting the housing bubble is deflating.

The soaring dollar intensifies the crisis facing Australian exporters, with the high exchange rate making many export opportunities unprofitable. Exports of goods have already crashed 12.4 per cent in the first half of the financial year, leaving a $24 billion trade deficit in their wake.

Also yesterday the Australian Bureau of Statistics reported that, excluding refinancing deals, the number of loans to owner-occupiers buying or building a home had slumped by 10.5 per cent since September, and the amount lent had fallen by almost $1 billion a month.

While the housing industry warned that the figures showed the boom was over, economists pointed out that loans had also fallen when the Reserve Bank raised interest rates in mid-2002, only to soar back when the Reserve took its foot off the brake.

But while the economists were predicting another rise or two in interest rates by June, the dollar continued its relentless climb, reaching levels Australia has not seen since the boom of 1988-89, which gave way to the recession of 1990-91.

The Reserve Bank's trade-weighted index of the dollar's value against a basket of other currencies closed yesterday at 65.9, up from 64.2 a week earlier, and the highest level recorded since Valentine's Day 1989.

Since September 2001 the trade weighted index has soared 42 per cent, as global investors are drawn to Australia's relatively high interest rates at a time when rates in most Western countries are at record lows.

The dollar leapt over the 79 US cent level for the first time in eight years, closing at 79.20 US cents, 64 per cent higher than the low point of 48.33 US cents in April 2001.

The main movement in global currency markets has been the slump in the US dollar, tactitly encouraged by the Bush Administration to improve US export competitiveness. But since September 2001 the Australian dollar has also risen 44 per cent against the Japanese yen, 27 per cent against the British pound, and 17 per cent against the euro.

The housing data showed the number of loans to owner-occupiers fell for the third month in a row, as high prices and rising interest rates deterred buyers. The only growth area was in refinancing of loans, as owners hit by higher rates shop around for better deals.

The figures show one in three housing loans written in December were to home owners switching their mortgage from one lender to another. And that does not count the unrecorded number of borrowers who negotiate cheaper rates with the same lender after threatening to switch.

Partly because of the refinancing boom, first home buyers made up just 13 per cent of new housing loans in December. But taking out refinancing, first home buyers made up 20 per cent of all loans to people buying their own home, closer to their traditional share.